September 2017

On Thursday 5 October 2017 - Friday 6 October 2017, the Graduate Institute’s Centre for Finance and Development will be hosting a two day Interdisciplinary Sovereign Debt Research and Management Conference (DebtCon).

Sovereign debt is at the centre of the policy debate in both advanced and emerging economies, and academic research in sovereign debt has flourished in recent years. However, knowledge is often built and disseminated within disciplinary academic silos. Scholars in anthropology, economics, finance, history, law, political science, and sociology approach the same urgent policy problems with different questions and methods. Law, market, and policy practitioners have yet more different perspectives on sovereign debt. This interdisciplinary conference joins the conversation across disciplinary and institutional lines. Bringing all these perspectives together is not easy but the effort is worthwhile because more relevant, institutionally-grounded scholarship will lead to policies informed by cutting-edge research, and ultimately - we must hope - fewer crises and less human suffering.

With the NAFTA negotiations, investment lawyers, lawmakers, business groups, and civil society are waiting to see how Canada, Mexico, and the US will address the heated topic of investor-State arbitration, where an investor can claim compensation directly against a host state based on a treaty breach before an ad hoc tribunal (ISA). Today, a considerable number of ISA claims arise from the commitment to accord fair and equitable treatment (FET) to covered investments. Without a multilateral investment treaty, UNCTAD has mapped over 2,000 treaties that contain FET and ISA. With a wealth of literature, investment treaties, and ISA awards still failing to define FET, the attention to reform ISA misses a key part of why ISA flourished: the vagueness of FET.

Just this morning, Rob Howse alerted to the news that Canada is considering dropping FET from its proposed NAFTA Chapter 11 text. This post will draw upon my archival research into the development of FET in early twentieth century investment law to elaborate three different options for reform of NAFTA Article 1105(1):

Article 1105: Minimum Standard of Treatment

Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.

Based upon my doctoral research into thousands of internal government deliberations, treaty and policy drafts, and business proposals from 1919 to 1956, one finding of my work was the disconnect between the early roles of FET in investment law and its contemporary counterpart. But, if that’s the case, then why should States continue to rely upon the language and formulation of FET clauses? Are States ‘locked in’ to FET?

My archival work elaborated on several roles for FET at the time. It highlighted when and how trade treaty architects (largely economists and trade lawyers) used the concept of FET in treaties in two situations. First, when contracting states could not agree on a specific treaty rule for certain trade topics. For instance, in the context of post-war, state parties relied on FET when they could not agree to a commitment of equality of treatment for state trading. Second, when contracting states recognized that precise rules could not capture every contingency and required broadness and vagueness (incompleteness in contract theory) to allow for the resolution of problems ex post. While not the entire story for FET, this history shaped how these architects turned to investment law as a natural kin to trade.

Of course, there’s more than one way to plug contractual gaps. Indeed, FET was not the choice standard for review of state actions in the context of the international investment provisions for the Charter of the International Trade Organization (ITO). In that case, the drafters relied on the standards of ‘reasonableness’ and ‘justness’ to evaluate capital-importing and capital-exporting states’ actions upon international investment. For instance, the London Charter draft required Members to impose ‘no unreasonable impediments’ to the obtainment of capital and facilities required for economic development, and commit to ‘take no unreasonable action’ injurious to the interests of other Members or persons. (Report of Joint Committee on Industrial Development, E/PC/T/23). And, while there was trouble translating these standards in French and Spanish, ‘reasonableness’ and ‘justness’ were prioritized over the concepts of ‘fairness’ and ‘equitable treatment’ (and equality of treatment) to capture the tension between preserving a state’s domestic policy choices and the desire to provide the investment protections necessary to promote foreign investment. ‘Equitable treatment’ remained important, but as a guiding principle by which the ITO would make recommendations for Member states’ future international investment agreements.

In short, ‘reasonableness’ trumped ‘equitable treatment’. For instance, when there was a Charter proposal to replace a proscription against ‘unreasonable action’ with ‘unfair or inequitable action’, several States associated these terms with the common-law concept of equity, and rejected this obligation. Later, a US architect of the Charter’s investment provisions privately mused that the choice of ‘unfair or inequitable’ was just more ‘legalistic’ than the terms ‘unreasonable and unjustifiable’. What was agreed to was FET as a general statement or principle, a placeholder if you will, for more precise rules developed by contracting states following the establishment of the ITO.

FET took on different roles in the US post-World War II friendship, commerce, and navigation treaties. As the US negotiated more of these treaties and further refined its investment policy, FET was initially transplanted from its trade-past to investment, and used as a ‘general statement’ in a proscription against ‘unreasonable or discriminatory’ State measures. Thereafter, the US cited to FET as a ‘general outlook’ to the treaty ‘as a whole’, and a ‘preambular link’ between the treaty’s preamble and the core treaty commitments. Early post-WWII US investment policy substituted MFNT and NT commitments with a ‘general statement’ of FET and non-discriminatory treatment. However, by 1950, in negotiation with Japan, the US was clear that FET was not equal to a third standard of treatment. This confirmed that it was not equal to national treatment (NT) or most-favoured-nation treatment (MFNT), and suggested it was not equal to a minimum standard of treatment (MST). In negotiations with Germany and Japan, the US cited FET as a ‘guiding principle’ for a ‘just’, ‘equitable’, or ‘liberal’ interpretation of the treaty. While there was no direct connection between MST and FET, there was limited archival evidence that FET could serve as a gap-filling protection, particularly against arbitrary treatment that escaped other ‘adequate standards of treatment’. While failing to provide precise commitments to US investors, the US nevertheless argued that FET could serve as a basis for complaint when US interests abroad were harmed by a contracting state’s actions. Regardless, there was no clear indication that a breach of FET entitled investors to compensation, and any possible complaint arising from FET (which was believed to be in extreme and limited circumstances) was intended for inter-state means of dispute settlement.

This brief historical reflection suggests that FET was useful as a tool to bring States to the negotiating table and resolve disputes on an inter-State level. From the moments in time I studied, private actors could not bring FET complaints via ISA. It also demonstrates that the contracting states recognized a need to inject some flexibility in these early investment provisions, such as with the use of FET. For the US, vagueness in the treaty was not the first choice, but the best choice at balancing the competing objectives of economic development and the expansion of world trade against the demands of US business for stronger rules of investment protection. Plus, there was the expectation that any gaps in the treaties would be filled in with future negotiations and adjudication. Therefore, while there was no clear role or meaning for FET in early investment law, FET was included in investment treaties for states to address controversies and unknowns within this developing area of law. It was not a catch-all obligation meant for resolution via ISA.

Considering this, I submit for discussion three options for addressing NAFTA Article 1105.

First, the Canadians have paid attention to recent disputes, and it is clear from the recently completed Canada-China and Canada-EU treaties that the trend is towards modernizing FET with a precise list of protections for covered investments (with or without a reference to customary international law). See, for instance, Article 8.10(1) and (2) of the EU-Canada agreement. This approach would appeal to those states seeking to set specific parameters to FET up front, and removes the unknowns associated with allowing a third party to interpret and apply an open-ended FET. Taking this approach further, the NAFTA parties could consider removing the reference to FET/MST altogether. Instead, they could focus only on those discrete elements the parties agree represent the modern FET concept. For instance, due process requirements, access to justice, abusive treatment to investors, and targeted non-discrimination. As FET was originally included to allow contracting states to address contingencies, but bearing in mind the existence of ISA, the NAFTA parties could retain the Canada-EU treaty mechanism that enables the parties to revise the list, allowing the treaty to evolve over time (article 8.10(3)).

The Canada-EU model captures a valuable attempt to further refine the rules, something championed by international investment scholars. Creating more precise rules and limiting the ability of a tribunal to decide the elements of FET would satisfy the ‘America first’ sovereignty-push by the US Trump administration, which recently expressed distrust in ‘unaccountable’ tribunals (which as Simon has noted has been a slow attack upon the WTO dispute settlement system).

Second, and related to the US’ questioning of the existing WTO dispute settlement system, last week Ambassador Robert Lighthizer spoke about the pre-WTO GATT dispute settlement system. This harkens back to the original ITO approach of diplomacy and inter-State dispute resolution (exactly the context from which FET appeared in the ITO Charter investment provisions). Therefore, another approach could appeal to this desire by maintaining FET in Article 1105, but removing it from the purview of ISA, leaving investors free to seek compensation via the other substantive protections.** An example of such a reformed clause would be:

Each Contracting Party will accord fair and equitable treatment to the other Contracting Party; and will commit to consultations or other peaceful means of dispute resolution [identified within a different section of the treaty] in the event that one of the Contracting Parties considers the other Party has modified or impaired the objects of the Treaty or any of the benefits accrued to them through the Treaty’s commitments.

Such a commitment would allow States to address circumstances that may upset the overall balance of the treaty. It would also permit States to address which circumstances require reform to the treaty without costly renegotiation. Moreover, this proposal would still permit States to cover adverse effects caused by a contracting state’s measures on foreign investors. For instance, by maintaining the ‘promotion of investment’ within its preamble, contracting States could initiate a complaint via the FET clause due to the impairment of this objective, thereby continuing to protect investors’ rights and interests where manifestly arbitrary treatment has occurred.

Finally, and perhaps the easiest (therefore maybe the likeliest outcome) is to maintain Article 1105 with updates taken from the TPP draft. For instance, Article 9.6.4 setting out that ‘the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach of this Article, even if there is loss or damage to the covered investment as a result.’ Or the attempt to safeguard policy space in Article 9.16.

I welcome your thoughts.

* Thanks to Federico Ortino, Todd Tucker, and Simon Lester for feedback on the post.

The future of the world trading system is at stake thanks to an impasse in Geneva over the appointment of members of the Appellate Body (AB) of the World Trade Organization (WTO). The Trump administration has been waging a behind-the-scenes campaign against the WTO’s dispute settlement system. It is holding hostage the selection of new members to the AB, which functions as the WTO’s de facto court of appeals, unless unspecified U.S. demands are met.

This U.S.-made crisis threatens to undo the multilateral rules-based trading system that the U.S. created after the Cold War and replace it with a return to aggressive power politics unchecked by the rule of law. Here’s what you need to know.

...

The Trump administration is pushing things much further

The Trump administration appears to want to intimidate and even paralyze the WTO Appellate Body. It suggests that it wants to change the rules over whether former AB members can continue to serve after their term expires on cases to which they were appointed during their term. The current European member Peter van den Bossche, for example, recently was selected (by random draw) to be on a new appeals panel pitting the U.S. (defending Boeing) against the European Union (defending Airbus) regarding aircraft subsidies. The U.S. says it intends to hold up any new appointments pending a satisfactory agreement on this question. The U.S. demands go against the explicit AB working procedures, which allow this kind of continuity. What particularly troubles the WTO membership is that the U.S. refuses to approve the launching of the selection process of new AB members until this issue is resolved, without the U.S. proposing what should be done.

The U.S. is in a strong position to shut down the AB, because the AB is already down from its allotted number of seven members to five, and will be down to four soon, and to three in less than a year. The Latin American seat has been vacant since July, and the E.U. seat will become vacant in December. Now, the South Korean member suddenly resigned his seat effective Aug. 1, to return home as South Korea’s new trade minister. This means there will be only four out of seven AB members in December — and potentially three when the African seat opens next September.

Unless new AB members are appointed, the Appellate Body will face severe delays. If the AB dips down to two members, it could not formally operate, since each case requires at least three sitting judges. But even a court with fourth or five judges will find it hard to manage its caseload, and face legitimacy problems, because decisions will be taken by only a few judges from a few countries with particular legal traditions (such as the U.S. and China). This could lead — in an extreme scenario — to the crumbling of the WTO dispute settlement system.

... We’ve had other provisions where the WTO has taken – really, I think, took the position that they were going to strike down something they thought shouldn’t happen rather than looking at these – the GATT agreement as a contract.

So what we’ve tended to see is that Americans look at the WTO or any of these trade agreements and we say, OK, this is a contract and these are my rights. Others – Europeans, but others also – tend to think they’re sort of evolving kinds of governance. And there’s a very different idea between these two things. And I think sorting that out is what have to do.

If your appellate body or your dispute-settlement process really thinks that we’re trying to evolve into what’s good for trade, that’s one thing. If what you’re going to do is look at the exact words and say here’s what was bargained when Ambassador Hills sat down and negotiated, she had a very precise idea of what it was that the United States was giving and what it was we were getting. And anything that doesn’t enforce that in that way is troubling.

And I think that the DSU has evolved in a way that it creates new obligations and it has reduced a lot of our benefits. ...

I was struck by the way he contrasted the American view of trade agreements as a "contract" with the European/other view of them as "evolving kinds of governance." This makes me think of Anthea Roberts' new book on international law ("Is International Law International?"), where she argues -- convincingly, in my view -- that there are very different conceptions of and approaches to international law around the world ("international lawyers in different states, regions, and geopolitical groupings are often subject to distinct incoming influences and outgoing spheres of influence in ways that reflect and reinforce differences in how they understand and approach international law"). Is it really the case that Americans view trade agreements as contracts and others view them as governance? And what are the implications of this distinction?

At the outset, let me note that, of course, treaties and trade agreements are contracts between nations, so it shouldn't really be controversial to refer to them that way. Nevertheless, there are (at least) two fundamental -- and related -- questions here: (1) how are trade agreements to be interpreted by third party adjudicators? and (2) what is the purpose of this dispute process, with implications for the appropriate institutional arrangements?

With regard to the interpretive process, I think what Lighthizer is suggesting is that Americans want a narrow interpretation, perhaps focusing on what is clearly set out in the text, and which does not fill gaps and address issues that are not explicitly covered by the terms of the agreement. By contrast, he suggests that Europeans and others hope for these adjudicators to do more gap filling and development of the law (and thus governing), taking the broad principles of the agreement and applying them to support the agreement's objectives more broadly, regardless of the specific obligations in the text.

First of all, I'm not sure that this characterization of American and European views is completely accurate. I can think of WTO cases brought by the U.S. (e.g., EC - Aircraft) where the U.S. asked the panel/AB for a broad interpretation of WTO rules on export subsidies, in order to find a violation. I'm not sure that fits with his idea of a narrow interpretation. In order to buy in to this distinction, I'd want to hear more from specific actors, and see some data on this. Who in U.S. trade policy believes in a narrow contract theory of interpretation, and who in other countries believes in a broader governance theory? Based on the cases they bring, what specific interpretive methodology does each set of actors actually support? I can definitely think of a few cases where the EU perhaps wanted to establish some general principles, but on the whole isn't everyone just trying to win the case at hand? Once you've decided to bring the case (or were forced to defend), you just make all the arguments that you can think of that might help you win.

Second, what exactly is the distinction between the two approaches? There are a number of factors interpreters could take into account, including text, context, object and purpose of the agreement, drafters' intent, drafting history, original meaning, public policy goals, etc.. What specific balance does Lighthizer see as reflecting the contract approach? And what does he see the Europeans asking for, or the Appellate Body doing, instead?

Turning to the purpose of the dispute process, and the required institutions, the U.S. has seemed, and seems even more so under the Trump administration, skeptical of strong, permanent international judicial institutions. For example, it prefers investment arbitration to an investment court; and it is worried about the way the Appellate Body has approached its role. What the U.S. seems to want is a narrow procedure that resolves disputes, with as little resulting "governance" as possible. It may see the development of strong international courts as undermining its own power.

The EU, by contrast, is pushing its multilateral investment court idea, and has not raised the same concerns about the Appellate Body. How do other countries feel about these issues? I'm not sure.

There is a fine line here, and the distinction is probably one of subtle degree, rather than widely diverging views of the ideal system. Even in the "contract" world, the courts will be "making some law." And the "governance" world isn't really governing all that much -- the Appellate Body make strike down zeroing, but anti-dumping is here to stay (unfortunately!). Again, I wonder how much these distinctions related to the nature of the system matter in practice, as actors engaged in the system mostly seem concerned about winning the cases they are involved in.

To some extent, the "contract" versus "governance" distinction reminds me of the "precautionary principle" versus "cost-benefit analysis" distinction some people talk about in relation to EU and U.S. regulation. I tend to think that this latter distinction is overblown, with the U.S. being more cautious in some areas and the EU more cautious in others (although, overall, the EU probably regulates more). A contract versus governance distinction may oversimplify the views of different countries in a similar way.

But even so, the language matters here. If U.S. government officials talk about international economic agreements a certain way, and others talk about them a different way, that may be enough to make Anthea's point. What would be interesting now is to hear from EU and other government officials on how they see the distinction between contract and governance in this area, and how they would like WTO dispute settlement panels and the Appellate Body to approach interpretation. The U.S. seems to want to raise these issues in the DSB. I think it would be a useful exercise for the WTO Members to put their views out there. We need a system that everyone is (mostly) happy with, and a clear expression of what each side is looking for from the system may help with that.

Recall that at a recent CSIS event, U.S. Trade Representative Robert Lighthizer said this:

... Back when Senator Brock and I were there and there was a system, it was before 1995, before the WTO, under the GATT, and there was a system where you would bring panels and then you would have a negotiation. And, you know, trade grew and we resolved issues eventually. And, you know, it’s a system that, you know, was successful for a long period of time.

Now, under this [WTO] binding dispute-settlement process, we have to figure out a way to have – from our point of view, to have it work.

It's true that GATT dispute settlement had a weaker enforcement mechanism that we have now with the WTO. Most people would prefer the stronger system, because the system is of much less value without effective enforcement, but there are certainly arguments that there are benefits to some aspects of the GATT system.

How serious was Lighthizer in his positive sentiments about the GATT? Apparently somewhat serious, because according to Politico, USTR is thinking about changes to NAFTA Chapter 20, the core state-state dispute procedure in NAFTA, that are along the same lines:

USTR CONSIDERS NON-BINDING DISPUTE SETTLEMENT MECHANISM IN NAFTA: The United States is considering dropping a binding mechanism in NAFTA for resolving government-to-government trade disputes in favor of a softer advisory system, sources following the talks told Morning Trade.

I want to hear more about this, because it is a bit vague and confusing. "Softer" how? "Advisory" in what sense? But nevertheless, here's a quick response.

First of all, I think we need to move away from the language about "binding" and "non-binding" dispute settlement in international trade agreements. In my view, this is not a very helpful way to think about things. Instead, we should look at the issue as one of varying degrees of enforceability. WTO rules are more easily enforced than GATT rules were, although quantifying that is very difficult. Perhaps the WTO is "binding" in some sense, but that hasn't helped Canadian and U.S. cattle ranchers sell their hormone-treated beef in the EU. Ultimately, then, what matters is enforceability, and there are usually some complex and detailed rules that have to be sorted through in order to determine the level that exists in a given agreement.

So what about this proposal for new NAFTA dispute procedures? Well, the old rules were not all that enforceable, as evidenced by the U.S. blocking panel selection in the Sugar case, back in the early 2000s. No NAFTA Chapter 20 panel has been established since then. I'm working on a paper proposing a fix to that, but in the meantime, we are told that USTR might want to soften up the rules even more. If that's true, here's one concern the U.S. business community will have with this idea. Imagine that Canada imposes some restrictions on dairy imports (not hard to imagine!). In the NAFTA renegotiation, some rules might be established to rein in those restrictions. But afterwards, Canada might keep those restrictions in place, and the U.S. might file a Chapter 20 complaint to get them removed. If the Chapter 20 panel "advises" Canada to stop restricting dairy imports, Canada could respond by saying, in effect, thanks for the advice, but we've decided to bow to pressure from our domestic industry and keep the restrictions in place. That's not a very good outcome from a U.S. perspective. Business groups, Congress, and other U.S. agencies should all be wary of any kind of softening of this kind. And they are, as Politico notes: "The proposal, which would be a major shift away from a decades-old push by the U.S. to build an international system of enforceable trade rules, is already raising concern across the executive branch and on Capitol Hill."

Along the same lines, Canada and Mexico are unlikely to accept this. Why have an agreement if it can't be enforced effectively?

I don't know where this is all going. I am genuinely curious what the Lighthizer trade team has in mind here. Maybe we'll hear more soon.

This is an excerpt from the Q & A at the Lighthizer CSIS event mentioned in the last post, relating to WTO dispute settlement. I'm just going to quote it for now, but I should have more to say later.

MR. MILLER: ...

To continue with the WTO, the United States has raised some objections to a dispute settlement understanding and the way the bodies are formed in that process. Could you tell us a little bit more about what the U.S. is trying to accomplish in terms of changing or reforming the dispute settlement body?

AMB. LIGHTHIZER: Well, I guess I would answer that in two parts. One, there are a number of issues which – on which there’s pretty broad agreement that the WTO, in dispute-settlement understanding, is deficient. I mean, there are transparency issues. There are issues with the staff. There are a whole variety of issues that we have a problem with. And I think there’s general agreement that there are problems.

But I think, even beyond that, the United States sees numerous examples where the dispute-settlement process over the years has really diminished what we bargained for or imposed obligations that we do not believe we agreed to. There have been a lot of cases in the dumping and countervailing-duty, the trade-remedies laws, where, in my opinion, the decisions are really indefensible, and even a lot of people who have much more free-trade orientation who read these question(s). And we’ve had tax laws that have been struck down. We’ve had other provisions where the WTO has taken – really, I think, took the position that they were going to strike down something they thought shouldn’t happen rather than looking at these – the GATT agreement as a contract.

So what we’ve tended to see is that Americans look at the WTO or any of these trade agreements and we say, OK, this is a contract and these are my rights. Others – Europeans, but others also – tend to think they’re sort of evolving kinds of governance. And there’s a very different idea between these two things. And I think sorting that out is what have to do.

If your appellate body or your dispute-settlement process really thinks that we’re trying to evolve into what’s good for trade, that’s one thing. If what you’re going to do is look at the exact words and say here’s what was bargained when Ambassador Hills sat down and negotiated, she had a very precise idea of what it was that the United States was giving and what it was we were getting. And anything that doesn’t enforce that in that way is troubling.

And I think that the DSU has evolved in a way that it creates new obligations and it has reduced a lot of our benefits. So coming to grips with that, both in the procedural realm but also just practically, is really what we have to worry about in the DSU. And it’s a fundamental part of the WTO. I mean, it’s a very – it raises a lot of, you know, very major issues for the WTO.

MR. MILLER: Yeah, that makes sense.

Well, on a practical level, in the last 20 years or so of dispute-settlement cases there’s two patterns that have come out. First, the big traders have a lot of cases on both sides, which is not surprising at all, and that there is – that the complainants tend to win much more than a coin toss, which says to me that there is a selection of cases that are worth the prestige of the country bringing them.

And so since the U.S. both is involved in a lot of cases and often is a respondent, how do you think that sort of the practical – the decisions on cases will affect the reform process?

AMB. LIGHTHIZER: Well, I mean, to the extent that we’re – that we’re objecting to the process, it’s because we don’t agree with the way the – in many cases the appellate body has approached this. We think the appellate body has not limited itself to precise – to precisely what’s in the agreement. So, I mean, that is the nature of our complaint.

And that’s not to say that we don’t win cases. Of course we win cases. Back when Senator Brock and I were there and there was a system, it was before 1995, before the WTO, under the GATT, and there was a system where you would bring panels and then you would have a negotiation. And, you know, trade grew and we resolved issues eventually. And, you know, it’s a system that, you know, was successful for a long period of time.

Now, under this binding dispute-settlement process, we have to figure out a way to have – from our point of view, to have it work.

U.S. Trade Representative Robert Lighthizer spoke at CSIS yesterday. The full transcript is here. I'm going to respond to some of his specific points.

Early on, he refers to a growing skepticism about trade:

For decades, support for what we call free trade has been eroding among the electorate. There has been a growing feeling that the system that has developed in recent years is not quite fair to American workers and manufacturing, and that we need to change.

Fifty-two percent of the 2,094 adults polled in the United States say they support expansion of free trade across borders. Within that group, 18 percent said they “strongly support” free trade, and 34 percent said they “somewhat support” it. Seventeen percent said they “somewhat oppose” free trade across borders, and 8 percent “strongly oppose” it.

I know there are some passionate opponents of trade, but most of the the polling I've seen suggests that a majority of Americans support it (the question in the poll above was "Do you generally support or oppose ... Expansion of free trade across borders"). You might not get applause at a campaign rally by praising NAFTA, but on the other hand harsh statements about trade agreements are not necessarily going to win you a majority of the vote.

He then talks about his preference for markets:

I believe, like many of you, that removing market distortions, encouraging fair competition, and letting markets determine economic outcomes leads to greater efficiency and a larger production of wealth both here and abroad. I’m sure that most here also agree that many markets are not free or fair. Governments try to determine outcomes through subsidies, closing markets, regulatory restrictions, and multiple similar strategies. The real policy difference, I submit, is not over whether we want efficient markets, but how do we get them.

What is the best thing to do in the face of market distortions to arrive at free and fair competition? I believe – and I think the president believes – that we must be proactive, the years of talking about these problems has not worked, and that we must use all instruments we have to make it expensive to engage in non-economic behavior, and to convince our trading partners to treat our workers, farmers, and ranchers fairly. We must demand reciprocity in home and in international markets. ...

All governments, including the United States, intervene heavily in markets, in a wide range of ways. Are some governments intervening more than others? Yes, although it is hard to come up with a precise ranking, and I suspect the United States is not in the lead when it comes to avoiding government distortions of the market. I support the idea of trying to convince other countries to reduce their market distortions, but we will probably have to remove some of our own in order to accomplish that.

Now on to trade deficits:

... the president believes – and I agree – that trade deficits matter. One can argue that too much emphasis can be put on specific bilateral deficits, but I think it is reasonable to ask, when faced with decades of large deficits globally and with most countries in the world, whether the rules of trade are causing part of the problem.

Now, I agree that tax rates, regulations, and other macroeconomic factors have a large part in forming these numbers, and the president is tackling these issues. But I submit the rules of trade also matter, and that they can determine outcomes.

In a simple example, how can one argue that it makes little difference when we have a 2 ½ percent tariff on automobiles and other developed countries have a 10 percent tariff, that it is inconsequential when these same countries border-adjust their taxes and we do not, or that it is unimportant when some countries continuously undervalue their currencies? Is it fair for us to pay higher tariff to export the same product than they pay to sell it here?

I don't get the sense that current U.S. government policy is tackling the macroeconomic factors that are at the heart of trade deficits. Without action there, the trade deficits will remain (not that it matters).

As for how the "rules of trade" can affect this, I made the point above that all governments intervene in markets, including through trade barriers. The World Tariff Profiles publication is helpful here. The United States has relatively low tariffs, although not the lowest and comparable to other developed countries (the U.S. simple average MFN applied rate is at 3.5%, Australia is at 2.5%, Canada is at 4.2%, the EU is at 5.1%, Japan is at 4.0%, and New Zealand is at 2.0%). Non-tariff protectionist measures are more difficult to measure and compare. But regardless, if we can use trade negotiations to bring down protectionist trade barriers at home and abroad, that is a good thing.

Then there is the issue of China:

I believe that there is one challenge on the current scene that is substantially more difficult than those faced in the past, and that is China. The sheer scale of their coordinated efforts to develop their economy, to subsidize, to create national champions, to force technology transfer, and to distort markets in China and throughout the world is a threat to the world trading system that is unprecedented.

Unfortunately, the World Trade Organization is not equipped to deal with this problem. The WTO and its predecessor, the General Agreement on Tariffs and Trade, were not designed to successfully manage mercantilism on this scale. We must find other ways to defend our companies, workers, farmers, and indeed our economic system. We must find new ways to ensure that a market-based economy prevails.

I'm not convinced we have really tried that hard to use WTO rules to target Chinese protectionism. We should file more cases, and pursue Article 21.5 complaints where we are unhappy with the compliance measures. I'm not sure why this hasn't happened.

Finally, there is a suggestion to reevaluate trade agreements after a certain period of time:

we are looking at all of our trade agreements to determine if they are working to our benefit. The basic notion in a free-trade agreement is that one grants preferential treatment to a trading partner in return for an approximately equal amount of preferential treatment in their market. The object is to increase efficiency and to create wealth. It is reasonable to ask after a period of time whether what we received and what we paid were roughly equivalent. One measure of that is change in trade deficits. Where there the numbers and other factors indicate a disequilibrium, one should renegotiate.

Not that any country is going to agree to this, but presumably such a rule would have to apply in both directions. Does the U.S. government really want to open up trade agreements and grant additional concessions if, for many possible reasons, the bilateral trade balance moves in the direction of a surplus after signing a trade agreement?

In a previous post Simon Lester has commented on President Juncker’s wish to rescue the EU’s trade policy, by concluding a set of streamlined trade agreements with Australia and New Zealand that would carve out contentious clauses on investment protection. In a previous blogpost from June 2017 I have suggested a split between EU trade and investment agreements. In light of this, I will provide some further comments on the EU Commission’s potential policy shift, which is most likely a response to recent EU law developments.

The EU’s Current Approach is Not Really Working

By now it is common knowledge that while the EU is a ‘veteran’ at concluding PTAs, its experience with investment protection is a lot more recent, following the changes brought by the Lisbon Treaty to the EU’s Common Commercial Policy. Following these amendments, the EU has embarked on an ambitious plan to negotiate far-reaching FTAs with Canada, Vietnam, Singapore, the USA, and Japan, which include/will include standards of investment protection and a new form of ISDS (‘Investment Court System – ICS’).

Combining trade and investment under one roof is not an EU invention; in a recent co‑authored paper that covered 158 post-NAFTA PTAs, Maxim Usynin and I came to the conclusion that the inclusion of investment chapters into PTAs is widespread in US, Canadian, Japanese, Australian, MERCOSUR and ASEAN PTAs, as well as rising in the PTAs of India, Chile or China. Choosing such an ‘all-in’ approach is not in itself problematic, provided that the fields covered by these agreements are not contentious internationally or domestically.

In case of the multi-level EU, the Commission’s mission to satisfy the various domestic and international interests has proven to be a daunting task. On the international level contracting parties such as Canada and Singapore are clearly frustrated. The 2014 version of CETA had to be revised in 2016 in order to include the EU’s new ICS, while the EU-Singapore FTA was on hold because of CJEU Opinion 2/15 and it now faces a renegotiation so as to include the ICS. Moreover, a Japanese official has recently declared that they would favour a classical type of ISDS mechanism in their FTIA with the EU, instead of the ICS. Domestically things do not look brighter. Civil society and NGOs have been protesting against including ISDS in EU FTIAs, followed by groups of academics and regional parliaments.

The Game Changers

In recent months two important events occurred that are most likely behind the Commission’s push to split trade and investment agreements. Putting the aforementioned difficulties aside, first, the CJEU delivered its binding Opinion 2/15, which clarifies EU and Member State competences over FTIAs. Second, Belgium has officially requested an Opinion from the CJEU on whether the ICS included in CETA is compatible with EU law.

2.1 The EU can now conclude a far-reaching trade agreement without the Member States

As the Annex to this post illustrates, in Opinion 2/15 the CJEU created a clear split between the various areas the EUSFTA that cover trade and those relating to investment. All the traditional trade related areas, such as market access for goods, trade remedies, various barriers to trade, customs and tariffs, fall under exclusive EU competences. Furthermore, services – including all five means of transport services -, public procurement, intellectual property, sustainable development, and competition are now also covered by the EU’s exclusive external competences, as well as those parts of the EUSFTA’s chapters on dispute settlement between the parties and transparency that do not relate to areas of shared competence. If we take away the aforementioned exclusive EU policy fields what we are left with is investment protection and ISDS, parts of which still fall under shared competences.

It follows that after Opinion 2/15 the EU can conclude a far-reaching trade agreement, without investment protection, by itself. This means that the presence of the Member States during the conclusion of such agreements is not required (no ‘mixity’), and national/regional parliaments will not be involved in the ratification process. Moreover, the Commission now has a solid legal argument against the political choice of its Member States to participate in the conclusion and ratification of such trade agreements.

2.2 The future of the ICS is in jeopardy

As mentioned, on the insistence of Wallonia, the Belgian federal government has requested an Opinion from the CJEU on whether the ICS model included in CETA is compatible with EU law. Not only will the rendering of this Opinion further stall the ratification of CETA, but as I have argued in a previous article, the CJEU will most likely find the ICS to be incompatible with the autonomy of EU law and the CJEU’s exclusive jurisdiction to give binding interpretations of EU law. In such a case the incompatible provisions would have to be removed from the international agreement in order for it to enter into force. This would most likely mean the end of bilateral Investor-State Courts.

Benefits of Removing Investment Chapters from FTAs

First, with the removal of the contentious ISDS item from the agenda, the new trade agreements could be negotiated more swiftly. Member State or regional parliaments would not block the ratification of such agreements and civil society would not cause further upheaval. It is worth mentioning that in the case of CETA, Vietnam and EU-Singapore the inclusion of investment chapters has delayed negotiations by several years, has caused domestic discontent and tarnished the EU’s international image

Second, such a trade agreement would only be concluded by the EU, which would considerably simplify its ratification and it would lower the chances of a prolonged provisional application of the agreement. This would create more legal certainty, since provisional application often does not include the whole agreement and it might create further complications in case of potential disputes brought under the agreement’s dispute settlement provisions.

Third, separate bilateral investment agreements could be concluded later, in the form of mixed agreements or even a potential multilateral agreement on an Investment Court.

Possible Drawbacks

There could also be a risk that the second bilateral investment agreement, or more likely a multilateral agreement, would not materialize. This could result in a gap in the protection of EU investments abroad. Nonetheless, it must be mentioned that in the case of the FTIA partners such as Singapore, Canada, Vietnam or the USA 46 Member State BITs are already in place. Furthermore, under Regulation 1219/2012 Member States continue concluding new, post-Lisbon BITs. 43 such agreements exist thus far, 18 of which have entered into force with many more awaiting approval.

Given the current deadlock in the conclusion of FTIAs, the removal of investment protection would at least ensure that the trade components of these agreements would not be jeopardized and a trade agreement could be concluded.

Annex – Competences over the EUSFTA after Opinion 2/15

No

Chapter

Advocate General

CJEU

1

Objectives and General Definitions

Exclusive EU

Shared *

2

National Treatment and Market Access for Goods

Exclusive EU

Exclusive EU

3

Trade Remedies

Exclusive EU

Exclusive EU

4

Technical Barriers to Trade

Exclusive EU

Exclusive EU

5

Sanitary and Phytosanitary Measures

Exclusive EU

Exclusive EU

6

Customs and Trade Facilitation

Exclusive EU

Exclusive EU

7

Non-Tariff Barriers to Trade and Investment in Renewable Energy Generation

Exclusive EU

Exclusive EU

8

Services, Establishment and Electronic Commerce

Exclusive EU except

Exclusive EU

air, maritime, inland water ways transport (shared)

9

Investment

Exclusive over FDI / ISDS except

Exclusive EU except

non-direct investment and ISDS related to it (shared)

Non-direct investment and ISDS (shared)

Termination of MS BIT excl. MS

Termination of MS BIT excl. EU

10

Government Procurement

Exclusive EU except

Exclusive EU

Procur. for trans. services (shared)

11

Intellectual Property

Exclusive except

Exclusive EU

non-commercial aspects of IP rights (shared)

12

Competition and Related Matters

Exclusive EU

Exclusive EU

13

Trade and Sustainable Development

Some components shared while others exclusive

Exclusive EU

14

Transparency

Shared *

Shared *

15

Dispute Settlement Between the Parties

Shared *

Shared *

16

Mediation Mechanism

Shared *

Shared *

17

Institutional, General and Final Prov.

Shared *

Shared *

* shared in so far as they relate to Chapter 9 on Investment to the extent that they fall under shared competence

Jean-Claude Juncker wants to style the EU as the undisputed champion of global trade when he steps up to deliver his State of the Union address in Strasbourg Wednesday.

The European Commission president’s pièce de résistance will be to propose a fast-track system to ensure Brussels can clock up quick trade deals while U.S. President Donald Trump lurches toward protectionism and Brexit tarnishes Britain’s international standing. He will announce that his first targets for streamlined agreements will be Australia and New Zealand, according to trade diplomats.

...

While Juncker may win kudos as a short-term savior of EU trade policy, his approach to securing fast deals will require slicing out contentious clauses on protecting foreign investors. ...

It is worth noting that this a Commission proposal, and the Council still needs to weigh in.

One question I have is whether it is both the substantive and procedural aspects of ISDS/investment protection that are being split from trade. Are substantive protections such as fair and equitable treatment staying in, but now subject only to state-state dispute settlement? Or will both the substance and procedure of investment protection come out?

Politico describes this move as "risky," and coming "at a heavy price for the EU," citing the following reasons offered by a number of sources:

-- "In rescuing trade deals, Juncker has fallen into another legal and political quagmire over how to protect European businesses in far-flung corners of the world, should their factories be seized or nationalized";

-- "Several analysts and lawyers accused the Commission president of seeking to pass the responsibility for protecting investors onto a body [a multilateral investment court] that will not exist for years"; "it’s quite difficult ... to imagine the U.S. under Donald Trump supporting this concept.”

-- this is "nothing more than a procedural trick" "to avoid the involvement of national parliaments in EU trade policy."

-- "One of the other key dangers is that the Commission will set a precedent with the Australian and New Zealand deals — but then be unwilling to follow it in riskier emerging markets"; “The Commission needs to be quite sensitive to not give the impression it discriminates between countries.”

-- "A final concern over slicing investment out of EU deals is that investment protection will revert to the turbid world of bilateral investment agreements that EU member countries have with other nations."

Here are a few thoughts on those points.

First, when evaluating the risk of this decision, it should probably be compared to the existing approach of doing trade and investment protection together, which comes with its own risks. My guess is that negotiating trade agreements with Australia and New Zealand that exclude ISDS/investment protection will go much more smoothly than what we have seen with many recent EU trade negotiations that included ISDS/investment protection. But we shall see.

Second, it is hard to imagine the U.S. supporting an independent multilateral investment court under Donald Trump or a future President. Maybe in the 1990s, before there was so much investment litigation, but it would be hard today.

Third, the question of the role of national parliaments in EU trade policy is an important one, but I don't think it is relevant to the question of whether trade policy and ISDS/investment protection should be split. EU member states should definitely consider what role they want to play in both of these issues, but that is the case regardless of whether trade liberalization and ISDS/investment protection are together or separate.

Fourth, should the EU be worried about treating developing countries differently with regard to investment protection? If it is based on evidence -- e.g., Country X expropriated the factory of a European company, and thus ISDS/investment protection is needed in relation to Country X -- then it does not seem all that controversial.

Access to justice continues to be an issue within the WTO Dispute Settlement Body (DSB) today, especially for developing countries. To keep the promise of a fairer trading system, developing country participation in the DSB needs to be improved, since the relationships between WTO members are still based on power rather than rules.

Dispute Finance (also referred to as Litigation Funding/Finance, Third Party Funding/Finance) has been helpful in providing access to justice for claimants with meritorious claims but limited financial capacity in the private sector, as well as in investor-state disputes. It is also capable of leveling the playing field in the DSB, as it can be utilized by developing countries to finance a WTO dispute.

In Dispute Finance, a third party to a dispute, unrelated to its subject matter, finances a meritorious claim at its own risk. The financing entity treats the claim as an asset, and provides all necessary financing required for procedure, lawyers, external experts, sometimes enforcement. The investment is secured by the value of the claim, and in the case of a successful outcome, the financer receives a percentage.

The Dispute Finance industry is subject to censure from various sources. Critics allege that it takes advantage of plaintiffs, and also the defendant community, for obvious reasons, challenges the model. Financers, in supporting investors in investor-state disputes, particularly before the ICSID, have been criticized for pressing large sums of compensation on the back of taxpayers.

States, however, could also take advantage of Dispute Finance. An expansion of the financing business to financing sovereigns in WTO disputes would create a win-win situation. It can allow developing countries to bring claims which they otherwise could not bring; it can give dispute financers the opportunity to take a more neutral stand, and provide their services not only in cases against sovereigns, but also in their support.

The demand for such a service might be significant, since most obstacles to developing country participation in the DSB are related to costs: A lack of expertise leads to an increased need for hiring expensive external experts. There is fear of economic pressure from the opposing state. Lengthy proceedings place a strain on a developing country’s resources, not only because experts are compensated according to complexity, but also because it takes time until the DSB’s recommendations and rulings are implemented.

The costs of initiating a dispute of medium complexity in the WTO are in the region of $ 500,000, but legal fees can quickly exceed $ 10,000,000. In many cases, developing countries have to resort to the financial support of local industries affected by the dispute, and thereby rely on private sources of capital already.

While the DSB recognizes the essentialness of quick proceedings (e.g. Art. 3.3 of the DSU), member states estimate 15 months from the request for consultations to the report of the Appellate Body. A period of at least 6 to 14 months should be added to this, as a reasonable period of time for the implementation of recommendations. Although this time frame is rather short in comparison to other international procedures, the financial hardship for developing countries can be fatal.

Existing models to face this financial burden include the designation of a qualified legal expert from the WTO (Art. 27.2 of the DSU), and the Advisory Centre on WTO Law (ACWL), with the purpose of helping developing countries get the maximum benefit from being a WTO member. Yet, the expert has to remain just as impartial as the WTO Secretariat itself. The ACWL’s support has empowered developing countries, but a key problem is conflict of interests: if both parties are ACWL members, the ACWL has to refer the case to external counsels.

It has been proposed to install a dispute settlement fund, similar to the ICJ Trust Fund, which already shows international legal aid in practice, but such fund does not exist at the moment.

Dispute finance can be a viable alternative for WTO members seeking support.

Besides the above-mentioned controversies, the typical remedies in WTO disputes can be an issue. WTO disputes will regularly not lead to a direct financial compensation, which the financer could benefit from. Still, complainants seek monetary benefits, be it through concessions (the losing country compensates the winning country with additional concessions equal to the original breach) or retaliation (the winning country withdraws concessions in that amount). The winning party can provide a share of those benefits for the funder.

Due to the youth and flexibility of the Dispute Finance industry, a bespoke contractual structure can be found for any kind of remedy. The financer can get a cut of the financial benefit, be it from the winning country, or affected industries.

One possibility is to assess the level of harm that is caused by the illegal measure challenged in the dispute, and take that as a basis for the compensation of the financer. If the WTO Panel decisions are implemented, and the disputed measures that were found to be inconsistent with the WTO, are withdrawn, a certain value of trade is not affected by those measures anymore, and can be realized again. Affected industries, or the affected country, can set aside part of the gain, and compensate the funder. In the case of compensation or the suspension of concessions, the complainant gains from increased tariff revenue, and is able to compensate the financing entity from a portion of the same. In any event, financial benefits of a winning party can be measured, and any compensation for the funder will represent only a minor percentage of the gained value of trade.

The financer is not impartial like the expert provided by the WTO, there are no conflicts with the ACWL, nor is there the need for other sovereigns supporting a dispute settlement fund. Financing can also be combined with the existing services.

Dispute Finance can bring a flexible, independent and powerful alternative for developing countries to increase access to justice, but also a way for developed countries to “outsource the risk” of a WTO dispute.

The strongest opposition to including issues such as gender equality in discussions over the North American Free Trade Agreement has come not from the United States but from within Canada, Prime Minister Justin Trudeau said Monday.

Speaking during a question and answer session at the first Toronto edition of the Women in the World conference, the prime minister said his government has faced hurdles in adding a gender chapter to NAFTA as it did in a free trade deal with Chile.

"The pushback we're getting is actually not from south of the border, the pushback we're getting is from Canadian Conservatives, who said 'Oh no this is about economics, it's about jobs... it's not about rhetorical flourishes of being good on environment or being good on gender,"' Trudeau said.

"To see that there is a supposedly responsible political party out there that still doesn't get that gender equality is a fundamental economic issue as well as many other things, that environmental responsibility is fundamentally an economic issue highlights that we do have a lot of work still to do in Canada."

For reference, the Canada - Chile chapter trade and gender chapter is here.

Presumably, despite anything they are saying now, the Canadian conservatives will support a renegotiated NAFTA regardless of whether or not it has a trade and gender chapter.

The bigger question is whether the Trump administration can handle this kind of chapter. The U.S. might not have pushed back yet, but we haven't gotten very far into the negotiations at this point.

It actually wouldn't shock me if the Trump administration accepted a trade and gender chapter, in exchange for other concessions. The administration could use this chapter to make things a bit awkward for Democrats who plan to vote against the new NAFTA.

European Commission President Jean-Claude Juncker aims to solve one of the greatest weaknesses of EU trade policy by proposing fast-track ratification of trade deals that would eliminate the need for approval by some 40 parliaments across Europe.

...

Building on the momentum of a landmark deal with Japan in July, he wants brisk progress on deals with Australia and New Zealand. Diplomats say these two deals will be the first to use a new framework that would allow ratification without the danger of a veto from any of the sometimes rebellious national and regional parliaments.

Juncker is expected to use his State of the European Union speech September 13 to call for a quick start of talks with Canberra and Wellington. Negotiating proposals based on the new model will then follow within “days,” according to a trade diplomat and several lawmakers in the European Parliament familiar with the dossier. Member countries would have to approve Juncker’s proposals.

The new model involves splitting deals into two parts. The vast majority of chapters in trade accords fall under the exclusive competence of the EU, meaning those sections can be ratified by the European Parliament and EU governments as represented at the Council.

The only reason national parliaments become involved is that some sections of the agreements related to investment — most contentiously the rules for big investors suing governments — do require approval back in the member countries.

The Commission’s plan is to carve out the parts of the deals related to investment so that the lion’s share of the trade pacts can be approved in Brussels.

The cabinet of European Commissioner for Trade Cecilia Malmström tested the waters for this approach in July, when it shared a “proposed new architecture for splitting” trade deals among EU ambassadors. POLITICO obtained a copy of the proposal. Jean-Luc Demarty, head of the Commission’s trade department, told lawmakers in a closed-door meeting this week that Brussels wanted to split all future trade deals, according to people at the briefing.

Reducing the say of national parliaments is sensitive, however. Germany — the heartland of last year’s protests against new trade deals — asked the Commission not to push too far ahead with this tactic until the country’s federal elections on September 24, several trade diplomats in Brussels said.

To be clear, this is a Commission proposal and it still needs approval by the Council.

People won't be surprised to learn that I support this splitting, but I'm a little confused about how this will work. There is a convenient chart here, but what exactly does it mean? Will they negotiate both trade and investment protection jointly as part of a single agreement, but then have a separate approval process for each part? Or will there be two completely separate negotiations and agreements? I'm not sure how many governments are willing to go along with ICS, so the latter may be preferable if we want to get trade deals done.

The point about maintaining "the say of national parliaments" makes no sense to me in this context. I see two completely separate issues here. On the one hand, there is the question of whether trade and investment protection should be done together. On the other hand, there is the question of how much say national parliaments should have in relation to each aspect. Is the issue here that national governments delegated power to the EU level on international economic matters, and now want to claw some of it back by giving national parliaments the power to approve the agreements the EU negotiates? Maybe their concern is that if they take ICS out, national parliaments won't have any say at all in approving trade agreements? To me, that seems like a misunderstanding of how things work now, because even if national parliaments get to approve the ICS part under the current process, that doesn't give them any substantive say over the trade/other parts. Thus, I'm not sure why member states would object to the split. But I'm not on the ground in Germany to listen to the debate, and the internal EU trade agreement process has gotten quite complicated, so maybe it makes more sense than it appears to.

The U.S. wants to "eliminate" NAFTA Chapter 19; Canada and Mexico want to keep it. It's hard to find a compromise between these two positions, but I gave it a shot with this proposal:

Regardless of whether Chapter 19 was justified initially, a long time has passed since then, and it is worth examining whether the original problems Canada sought to address still exist. With that in mind, the parties could commit to two related items as part of the NAFTA renegotiation.

First, they could do a thorough investigation of how Canadian, Mexican and U.S. courts have been carrying out their review of anti-dumping and countervailing duty determinations (and compare those reviews to the Chapter 19 ones).

Canada's concerns about court reviews stem from the 1980s, but the current situation is unclear. These courts are still hearing appeals of determinations related to all other countries, so there is plenty of material to look at.

In this regard, a commission of experts from all three countries could study a number of items: the outcomes of domestic court reviews; the quality of these courts' reasoning; and the timeliness of the decisions. This would provide an evidentiary basis for evaluating the Chapter 19 process, to see if it is still needed.

The commission could make recommendations for improvements to the domestic court review process, including related to judges' training in this specialized area. If there is a problem with domestic courts, the ideal solution would be to fix that problem for all countries, rather than to bypass the process for just a couple of them.

Second, the parties could plan for the possible expiration of Chapter 19 after a defined period of time (five or 10 years is reasonable). This expiration could happen automatically, or it could be tied to the expert commission's report.

For example, upon the issuance of the report, Chapter 19 could be set to expire unless all three NAFTA parties voted to keep it; or each party could be given the ability to opt out.

It is also worth emphasizing that the real problem with anti-dumping and countervailing duties may be the underlying statutes and regulations, rather than domestic courts. A review of the policies set out there, and the agencies' application of them, may be the most productive course of action.

In this regard, Article 1907 of the Canada-U.S. Free Trade Agreement provided for the establishment of a working group that would develop a substitute system for dealing with "unfair" pricing and government subsidies.

In other words, it was intended to take on the problems more directly than the binational panel system did. As part of the NAFTA renegotiation, this idea could be revived and the working group reconstituted.

Obviously, this won't make either side completely happy (which is why it is called a compromise), but maybe there's just enough in here for both sides that if Chapter 19 is one of the last items on the negotiating table, something along these lines could be the solution.

The Canadian government is looking for Canadians and non-Canadians to be on their international trade and investment dispute rosters (application details at the link):

Members (appointment to roster), International Trade and International Investment Dispute Settlement Bodies

Appointment Opportunities

We know that our country is stronger — and our government more effective — when decision-makers reflect Canada's diversity. The Government of Canada will use an appointment process that is transparent and merit-based, strives for gender parity, and ensures that Indigenous peoples and minority groups are properly represented in positions of leadership. We will continue to search for Canadians who reflect the values that we all embrace: inclusion, honesty, fiscal prudence, and generosity of spirit. Together, we will build a government as diverse as Canada.

The Government of Canada is currently seeking applications from diverse and talented Canadians from across the country who are interested in the following positions, as well as applications from non-Canadians for some of the following positions:

Members (appointment to roster)

International Trade and International Investment Dispute Settlement Bodies

A number of international trade and investment agreements to which Canada is a party provide for the establishment of rosters of persons available to serve on dispute settlement bodies. Should a dispute arise under the agreement, individuals from the roster are named to the dispute settlement body through a process specified in the relevant agreement to determine the dispute in accordance with the provisions of the agreement.

At this time, Government of Canada is seeking applicants for appointment to rosters for the following bodies:

North American Free Trade Agreement (NAFTA)

NAFTA Chapter 20 (General State to State) Roster: This roster is established pursuant to paragraph 2 of Article 2009 of NAFTAand is used to constitute panels that determine disputes covered by Chapter 20 of that Agreement. The Chapter provides for the establishment of a roster of up to 30 nominees (10 from each Party to NAFTA). A nominee is appointed by consensus of NAFTA Parties for a term of three years and may be reappointed. The Government of Canada is thus seeking 10 appointees to this roster.

NAFTA Chapter 19 (Trade Remedies) Roster: This roster is established pursuant to paragraph 1 of Annex 1901.2 of NAFTA and is used to constitute panels that determine disputes covered by Chapter 19 of that Agreement. The Chapter provides for the establishment of a roster of at least 75 nominees (at least 25 from each NAFTA Party). The Government of Canada is thus seeking at least 25 appointees to this roster and is anticipating that appointees will serve a term of five years with the possibility of reappointment.

NAFTA Chapter 19 Extraordinary Challenge Committee (ECC) Roster: This roster is established pursuant to Annex 1904.13 of NAFTA and is used to appoint a Committee that reviews decisions made by panels under NAFTA Chapter 19. The Chapter provides for a roster of up to 15 individuals (five from each NAFTA Party). The Government of Canada is thus seeking five appointees to this roster and is anticipating that appointees will serve a term of five years with the possibility of reappointment.

NAFTA Chapter 14 (Financial Services) Roster: This roster is established pursuant to paragraph 2 of Article 1414 of NAFTA and is used to constitute panels that determine disputes covered by Chapter 14 of that Agreement. The Chapter provides for a roster of up to 15 individuals (five from each NAFTA Party). A nominee is appointed by consensus of NAFTA Parties for a term of three years and may be reappointed. The Government of Canada is thus seeking five appointees to this roster.

NAFTA Article 2022 Advisory Committee on Private Commercial Disputes: This body is created pursuant to Article 2022 of NAFTA and submits reports and makes recommendations to the NAFTA Free Trade Commission on the availability, use and effectiveness of arbitration and other procedures for the resolution of private international disputes in the NAFTA region. The Committee comprises up to 10 members from each NAFTA Party, up to two of whom may be officials representing the Party and up to eight of whom may be selected from outside the Government. Each NAFTA Party appoints its own members of the Committee and establishes terms for their appointment. The Government of Canada is thus seeking approximately eight appointees to this Committee and is anticipating that they will serve a term of three years, with the possibility of reappointment.

International Centre for the Settlement of Investment Disputes (ICSID)

ICSID Panel of Arbitrators: This is a roster to which Canada may designate up to four individuals pursuant to Article 13(1) of the ICSID Convention. Designated individuals may be selected by the Secretary-General of ICSID to serve on a tribunal in a dispute that does not involve Canada or Canadian investors. Designated individuals need not be nationals of the state designating them. Designates serve a term of six years and may be reappointed. The Government of Canada is thus seeking four appointees to this roster.

ICSID Panel of Conciliators:This is a roster to which Canada may designate up to four individuals pursuant to Article 13(1) of the ICSID Convention. Designated individuals need not be nationals of the state designating them. Designates serve a term of six years and may be reappointed. The Government of Canada is thus seeking four appointees to this roster.

Canada-Costa Rica Free Trade Agreement (CCRFTA)

CCRFTA Article XIII.9 (General State to State) Roster: This is a roster created by Article XIII.9 of the CCRFTA that may be used to constitute panels that determine disputes covered by Chapter XIII of that Agreement. The roster established by the Parties to the CCRFTA may include up to 20 individuals, at least five of whom are not citizens of Canada or Costa Rica. Consequently, in addition to Canadians, the Government of Canada is actively seeking applications from those who would meet this citizenship requirement. Individuals are named to the roster on the agreement of the Parties for a term of three years and reappointed to a second term unless a Party disagrees. The Government of Canada is thus seeking approximately 10-15 appointees to this roster, including appointees who are not citizens of Canada or Costa Rica.

CETA Chapter 29 (General State to State) Roster – Anticipatory: Following provisional application of this provision, this roster will be established pursuant to Article 29.8 of CETA and will be used to constitute arbitral panels to determine disputes covered by Chapter 29 of the Agreement. Chapter 29 applies to any dispute concerning the interpretation or application of the provisions of CETA, except as otherwise provided. The Chapter provides for the establishment of a roster of at least 15 nominees: five from each Party to CETA and five who are not nationals of either Party who could serve as chair of an arbitral panel. An individual is appointed to the roster by the CETA Joint Committee. CETA does not provide for a set term of appointment to a roster. The Government of Canada is seeking approximately 8-10 appointees to this roster, including appointees who are not citizens or permanent residents of either Canada or any EU member state.

CETA Chapter 13 (Financial Services) Roster – Anticipatory: Following provisional application of this provision, this roster will be established by Article 13.20 of CETA and will be used to constitute arbitral panels to determine disputes arising under Chapter 13 of the Agreement. The Chapter provides for the establishment of a roster of at least 15 nominees: five from each Party to CETA and five who are not nationals of either Party who could serve as chair of an arbitral panel. An individual is appointed to the roster by the CETA Joint Committee. CETA does not provide for a set term of appointment to a roster. The Government of Canada is seeking approximately 8-10 appointees to this roster, including appointees who are not citizens or permanent residents of either Canada or any EU member state.

CETA Chapter 23 (Trade and Labour) Roster – Anticipatory: Following provisional application of this provision, this roster will be established by Article 23.10 of CETA and will be used to constitute expert panels to examine matters arising under Chapter 23 of the Agreement. The Chapter provides for the establishment of a roster of at least nine nominees: each Party is to name three nominees and the Parties are to agree on naming three nominees who are not nationals of either Party who could serve as chairperson of a panel of experts. An individual is appointed to the roster by the Committee on Trade and Sustainable Development established by CETA. CETA does not provide for a set term of appointment to a roster. The Government of Canada is seeking approximately 3-5 appointees to this roster, including appointees who are not citizens or permanent residents of either Canada or any EU member state.

CETA Chapter 24 (Trade and Environment) Roster – Anticipatory: Following provisional application of this provision, this roster will be established by Article 24.15 of CETA and will be used to constitute expert panels to examine matters arising under Chapter 24 of the Agreement. The Chapter provides for the establishment of a roster of at least nine nominees: each Party is to name three nominees and the Parties are to agree on naming three nominees who are not nationals of either Party who could serve as chairperson of a panel of experts. An individual is appointed to the roster by the Committee on Trade and Sustainable Development established by CETA. CETA does not provide for a set term of appointment to a roster. The Government of Canada is seeking approximately 3-5 appointees to this roster, including appointees who are not citizens or permanent residents of either Canada or any EU member state.